School of Business & Management
Master of Business Administration
BUSM 6513 Legal and Ethical Responsibility
COURSE DESCRIPTION:
A study of business law and ethics, with an emphasis on recognizing ethical dilemmas,
managing legal risk and leading with integrity. Legal topics include contracts, torts, intellectual
property and organizational structure.
INSTRUCTOR:
Name: Teresa Gillespie, J.D., Dean
Office Location: Barton Building #207
Office Hours: Email to schedule appointment
E-mail: teresa.gillespie@northwestu.edu
Office phone: 425-889-5290
ABOUT THE INSTRUCTOR:
Dr. Gillespie, Dean of the School of Business and Management, has been licensed to practice
law in Washington since 1986. For nearly two decades, she handled in-house litigation for a
Fortune 500 company. In this capacity, she represented the corporation in complex commercial,
governmental and employment lawsuits. She has been teaching at Northwest University since
2000. She received her JD degree from the University of Washington and her BA degree and
Secondary Teaching Credential from California State University, Northridge. Her husband Gary
is the Chair of the Communication Department and coach of the Eagle Debate team at Northwest
University.
1
REQUIRED TEXTS:
Richardson, John E. Annual Editions Business Ethics 11/12, 23rd Edition. McGraw Hill (2012).
ISBN 978-0-07-352865-6
Bagley and Dauchy, The Entrepreneur’s Guide to Business Law, 3rd Edition. Thomson West
(2008). ISBN 978-0-324-20493-3. Note that we will not be using the most recent 4th edition!
Wall Street Journal. All students will be expected to read the journal on a daily basis during
the course. A reduced rate student subscription is available from the University bookstore. The
Journal generally extends the student discount rate for up to a year after you graduate, so you
may find it beneficial to subscribe. You may also access the journal via the NU Library portal.
Additional reading and resources will be posted on the course Discovery site.
COURSE OBJECTIVES:
Students completing this course will:
1.
2.
3.
4.
5.
Understand typical legal issues involving business startups and management practices;
Recognize the complexity of ethical decisions faced by business managers;
Understand the historical, theoretical framework for evaluating ethical issues;
Reflect upon a personal ethical dilemma encountered in management;
Be able to think through the legal and ethical consequences of a managerial decision in a
logical, structured way.
CLASS SESSIONS: Tuesday evenings, June 21 - August 2. Saturday session July 16.
GRADING AND EVALUATION:
Assignment
MBA Program assessment
Ethical Dilemma Paper
Summary exam
Debate Panel/ Presentation
Abstracts/ participation
Grading Scale
282 - 300 = A
270 - 281 = A261 - 272 = B+
249 - 260 = B
240 – 248 = B-
Points Possible
20
80
60
60
80
300 points possible
231 –239 = C+
219 – 230 = C
210 – 218 = CGraduate students must maintain a B average.
2
MBA Program Assessment
Since this is the last MBA course for most students, we will devote some time to reflect on the
entire program. After the first session, each student will participate in an online forum to
evaluate each of the core courses in the MBA program. The schedule will be given during the
first session. Students who complete each assessment on time will receive the full 20 points.
Late assessments will receive a reduction in points. Students who haven’t yet completed all
courses must still participate in reviewing the courses they have taken.
Evaluation questions:


What are the three most important and relevant concepts I learned that will have a
direct impact upon my life and career?
What content, discussion, or activity should be added and/or deleted from this
course?
Ethical Dilemma Paper
Describe and evaluate a real-life “gray area” ethical issue that you experienced or observed in the
workplace. Your paper should describe the facts, identify the ethical issue(s) that you faced,
analyze the issue(s) based upon guidelines discussed in class and include a personal reflection on
the significance of the issue for you personally. For example, the issue may have clarified an
aspect of your character or a career goal (“Who am I?”) or the nature of the organization you
were affiliated with (“Who are we?”), either positively or negatively.
Your paper should be 8-10 concise pages, double-spaced, size 12 Font and APA format. We
will discuss this assignment in class. The paper will be due one week from the last class session.
Summary Exam
A summary exam focusing on concepts covered in class will conclude the course.
Panel Presentation
Each student will be part of a 2- or 3-person team that will research, evaluate and discuss the
ethical and legal complexities of a workplace dilemma described in the Business Ethics text
(articles 9 – 18, 22 – 23, or 34 – 39). Each student will turn in a 5 - 6 page research paper on the
topic with at least 3 sources in addition to the text. The panel presentation should be
informative, lively, thought-provoking and interesting. The presentation can be a debate about
the topic, a discussion of a particular situation that illustrates the issue or a simulation, such as a
talk show or a board room discussion. Spend at least 25 – 30 minutes in the presentation, with
an additional 10 – 15 minutes for classroom discussion (45 minutes in total). Some class time
will be allocated for you to prepare for your panel. Your paper is due at the time of your
presentation.
3
Abstracts/ Participation
To facilitate discussion, students will be assigned to write an abstract from the weekly reading.
An abstract is a short summary of the article or case. Each week’s abstract is described below.
All assignments are due at the beginning of class. Your active participation in class discussion
will be included in this part of your grade.
One of your assigned abstracts will be a summary of a current event from the Wall Street Journal
that involves a legal or ethical issue. Each week, one or more students will lead the class in a
discussion of a current legal or ethical issue in business. The presenting student must turn in a
one-page discussion of the event that describes the situation, identifies the legal or ethical issue,
presents the student’s opinion or perspective and poses a question for class discussion. Grading
will be based upon both the paper and leadership of the class discussion. Wall Street Journal
assignments will be made the first week of class.
1. June 21
What should an MBA Graduate Should Know about Law?
Read the Law text, chapters 1 – 3; the Rule of Law speech and the Green Tree Financial v.
Randolph case excerpt (at end of syllabus). Read the Wall Street Journal each day and pay
particular attention to stories involving law and ethics.
Write a one-page abstract summary or outline of the attorney-client privilege, as described in the
text at the end of chapter 3. You do not need to do any additional research. Be prepared to
discuss when the privilege applies and why it is important.
Write a one-page abstract, or brief, of the Green Tree case. See sample brief at the end of
syllabus and follow this outline.
Parties: Name the parties in the case and explain their relationship to each other. Who
is the Plaintiff, the entity that originally filed suit? Who is the Defendant, the entity that
was sued? Who is the Petitioner, who filed the appeal? (“Plaintiff Bill Jones, who is also
the Petitioner, is a customer of Defendant Tip Top Restaurant.”)
Facts: Explain the pertinent situation that brought the case to trial. Who did what to
whom? What is the behavior complained of? Why are the parties in court? Do not
include information about what happened after the lawsuit started, as this will be included
instead in the next items. (“Jones slipped and fell at Tip Top Restaurant and injured his
knee. Jones claims that Tip Top’s steps were negligently designed.”)
Lower Courts: Who filed suit initially? Who won? Who filed the appeal? (“Jones
filed suit and lost in a summary judgment. Jones filed an appeal.”)
Legal Question: What’s the legal issue that the court is deciding in this case that you are
reading? Note that this can be expressed in a number of ways, but it should be phrased so
that it can be answered ‘yes’ or ‘no.’ You can use the language that the appellate court
4
used, but make sure you understand it. (“Did the lower court make an error in
dismissing Jones’ case?”)
Legal Answer and Who Wins: Who prevails in the case you are reading? Answer the
legal question with a ‘yes’ or ‘no’ answer. (“Yes, the lower court was in error and Jones
wins the appeal, allowing his case to go back to the trial court for a trial on the facts.”)
Reasoning: What are the legal reasons identified by the court in deciding the issue?
Although you can use the words used by the court, be sure you understand what they
mean. (“The lower court should not have dismissed Jones’ case because it is up to a jury
to decide the facts of whether Tip Top Restaurant was negligent or not.”)
Significance: What should a business leader learn from this case about managing a
business operation? (“This case is an excellent example of why disputes like this should
be settled early. Courts are reluctant to grant summary judgment when the facts are not
clear and will expect the case to be decided by a jury.”)
Note that writing a concise legal abstract or case brief can be challenging. You may need to read
the case several times in order to understand who won and why. You will be writing several
briefs during this course, so you will have an opportunity to improve this skill!
See this online legal glossary if you need help with a legal word or phrase:
http://public.findlaw.com/library/legal-system/court-glossary.html
2. June 28
Exercising Moral Leadership: Giving Voice to Values
Read the Ethics text, articles 1 – 5. Read chapter one of “How Good People Make Tough
Decisions,” and the article “Ways of Thinking about Our Values in the Workplace,” posted on
the Course Discovery page.
Write a 2-3 page abstract discussing how one or more of the considerations in Articles 2 or 4
specifically applies to an organization that you are familiar with (one you work for, are a
member of, own shares in, etc). You may need to do additional online research or an interview
to complete your abstract.
Write a 2-3 page abstract in which you discuss a time when your values conflicted with what you
were expected to do in a particular, non-trivial management decision and you either spoke up and
acted to resolve the issue or did not speak up. The situation need not involve a violation of law
or a serious ethical issue. In your abstract, describe what happened, what you said or did and
what the consequences were. If you were able to speak up or act, what was your motivation?
Was this hard or easy? If you were not able to speak up or act, why not? What would have
motivated you to speak up or made it easier? How satisfied were you with the outcome?
Write comments on the online forum for MBA courses: Leadership Development,
Organizational Management and Operations Management.
5
3. July 5
Managing Gray Areas
Read the Ethics Text, articles 6, 7, 21, and 31 – 33. Read The Functionality of Gray Area Ethics
in Organizations, by John G. Bruhn, from the Journal of Business Ethics (2009), 89:205 – 214,
Issue 2. This is available on ProQuest from the NU Library Portal.
Write a 2-page abstract of the Parable of the Sadhu (Article 21). Identify the facts and ethical
issue(s) that concerned the author. Evaluate the problem from each perspective discussed in
Article 1: Utilitarianism, Rights, Fairness, Common Good and Virtue. How does this situation
illustrate challenges facing organizational leaders?
Write a 2-page abstract of a real-life “gray area” ethical issue that you experienced or observed
in the workplace. This may be the same issue that you chose to write about for your Ethical
Dilemma Paper. Be prepared to discuss the issue in class.
Write a 1- page abstract of a Case that will be assigned to you.
Write comments on the online forum for MBA courses: Marketing Management, International
Business and Informational Technology Management.
4. June 12
Law & Ethics – Employment Issues
Read the Law text, chapter 10. Read the Ethics text, articles 19 and 20. Read the Thompson v.
North American Stainless case excerpt (in the “Cases” document on Discovery).
Write a 1-page abstract of the Thompson v. North American Stainless case following the analysis
for case briefs described above.
Write a 2-page abstract answering one of the following questions pertaining to Article 20
(“Whistleblowers Get a Raise”), based upon additional Internet News research and your own
opinion: Should the new Whistleblowing Recovery Laws apply to CFOs? Should
Whistleblowers employees be required to file an internal complaint before going outside their
organization? Would the Grimm Bill deter Whistleblowers? Be prepared to discuss this issue in
class.
Write comments on the online forum for MBA courses: Intermediate Accounting for Managers,
Financial Management and Corporate Strategy.
5. July 16 (Saturday session, 9 – 1pm)
Law & Ethics – Business Structure
Read the Law text, chapters 4, 5 and 6. Read the Clackamas Gastroenterology Associates v.
Deborah Wells case excerpt (on Discovery). Read Putting a Stake in Stakeholder Theory, by
6
Otis and Strudler, from the Journal of Business Ethics (2009) 88:605 – 615. (Available from the
NU Library portal and on the course Discovery site).
Write a 1-page abstract of the Clackamas Gastroenterology Associates v. Deborah Wells case,
following the analysis for case briefs described above.
Write a 2-page abstract of the Putting a Stake in Stakeholder Theory article. What’s the problem
with Stakeholder Theory according to this article? Do you agree? Explain.
6. July 19
Law & Ethics – Risk Management (Contracts and Torts)
Read the Law text, chapters 8 and 11. Read Article 28 in the Ethics text. Read the Facebook v.
Pacific Northwest Software and the Iannelli v. Burger King case excerpts (on Discovery).
Write an abstract of both the Facebook and Burger King cases.
Write comments on the online forum for MBA courses: MBA Project, Coaching Project
Managers, and Legal & Ethical Responsibility.
7. July 26
Law & Ethics – Intellectual Property
Read the Law text, chapter 14. Read the Ethics text, articles 25 and 26. Read the Campbell v.
Acuff-Rose Music case.
Write an abstract of the Campbell v. Acuff-Rose Music case excerpt.
August 2
Law & Ethics – Summary Exam and Presentations
Prepare for the summary exam and for your panel presentations.
August 9
Ethical Dilemma Paper due (one week after last class session).
ATTENDANCE POLICY:
Since participation is a significant part of the learning experience in this course, students should
make every effort to attend all class sessions. Contact the Professor in the event of an
unavoidable absence. To receive credit for a missed session, you will need to complete all work
due that day and may also be assigned a makeup assignment.
Please be courteous to other students while using the computer during class.
Cell phones always off during class sessions.
7
Rule of Law speech
This subject, “Justice and the Rule of Law,” is so quintessentially British that there is no wonder
this month’s presidency chose it as the subject for open debate. In the U.S., first year law
students study English common law; and American concepts of law, government and individual
rights, not to mention our language, literature and basic values derive from our British heritage.
Some of those points might be disputed on the other side of the Atlantic, but over here, Mr.
President, your offspring are eternally grateful.
Today, I want to highlight one aspect of the rule of law: the importance of transparency.
Transparency is a true engine of the rule of law, and can promote a responsive and trusted
judicial system in both stable societies and those scarred by conflict.
For the rule of law to grow in a society, the people must know the law. The law must be
transparent to all citizens. That means the judicial system – courts, police, prisons – must be
open and visible. Making the law available means educating the citizenry. It means that judges
must reach and publish reasoned decisions in cases. Star chambers are incompatible with the
rule of law. The law may seem to require special expertise to understand. And if the law is not
accessible to the ordinary citizen, if the ordinary citizen cannot know the law, then the rule of
law will be far out of reach. Knowledge and openness are the best bulwarks against arbitrary
decision-making, whether by courts or by governments.
The United Nations in particular should marshal its resources to help societies emerging from
conflict to develop their national judicial capacities in a manner that is accountable to their
citizenry. But the rule of law cannot only be imposed by international bodies, to make the rule of
law effective, citizens must know their own government. They must understand how it works
and how to influence it. Where legal and judicial matters necessarily involve certain confidences
and restraints on sharing of information, absolute secrecy can encourage corruption.
Transparency is an engine to a modern economy and to participating in the global economy.
Access to information technologies plays an important role in open and free societies, both to
stimulate economic activity and to provide citizens with information to know and monitor their
government, including the judicial system. Therefore, in addressing the problems of countries
that have been engulfed in conflict and are seeking to build stable, peaceful, and prosperous
societies, we should assist with developing a judicial system based on transparency and
openness.
Excerpts from a Speech by Ambassador John C. Danforth, U.S. Representative to the United Nations, on
Justice and the Rule of Law, in the Security Council, October 6, 2004
8
Green Tree Financial v. Randolph, 121 S. Ct. 513 (2000) [edited]
In this case we… address the question whether an arbitration agreement that does not mention
arbitration costs and fees is unenforceable because it fails to affirmatively protect a party from
potentially steep arbitration costs. We conclude that an arbitration agreement's silence with
respect to such matters does not render the agreement unenforceable.
Respondent Larketta Randolph purchased a mobile home from Better Cents Home Builders,
Inc., in Opelika, Alabama. She financed this purchase through petitioners Green Tree Financial
Corporation and its wholly owned subsidiary, Green Tree Financial Corp.-Alabama. Petitioners'
Manufactured Home Retail Installment Contract and Security Agreement required that Randolph
buy Vendor's Single Interest insurance, which protects the vendor or lienholder against the costs
of repossession in the event of default. The agreement also provided that all disputes arising
from, or relating to, the contract, whether arising under case law or statutory law, would be
resolved by binding arbitration.1
Randolph later sued petitioners, alleging that they violated the Truth in Lending Act (TILA),
15 U. S. C. §1601 et seq., by failing to disclose as a finance charge the Vendor's Single Interest
insurance requirement. She later amended her complaint to add a claim that petitioners violated
the Equal Credit Opportunity Act by requiring her to arbitrate her statutory causes of action. She
brought this action on behalf of a similarly situated class. In lieu of an answer, petitioners filed a
motion to compel arbitration, to stay the action, or, in the alternative, to dismiss. The District
Court granted petitioners' motion to compel arbitration, denied the motion to stay, and dismissed
Randolph's claims with prejudice. The District Court also denied her request to certify a class.
Randolph appealed.
The Court of Appeals for the Eleventh Circuit first held that it had jurisdiction to review the
District Court's order because that order was a final decision. The court then determined that the
arbitration agreement failed to provide the minimum guarantees that respondent could vindicate
her statutory rights under the TILA. Critical to this determination was the court's observation that
the arbitration agreement was silent with respect to payment of filing fees, arbitrators' costs, and
other arbitration expenses. On that basis, the court held that the agreement to arbitrate posed a
risk that respondent's ability to vindicate her statutory rights would be undone by "steep"
arbitration costs, and therefore was unenforceable….
We now turn to the question whether Randolph's agreement to arbitrate is unenforceable
because it says nothing about the costs of arbitration, and thus fails to provide her protection
from potentially substantial costs of pursuing her federal statutory claims in the arbitral forum.
Section 2 of the FAA provides that "[a] written provision in any maritime transaction or a
contract evidencing a transaction involving commerce to settle by arbitration a controversy
thereafter arising out of such contract ... shall be valid, irrevocable, and enforceable, save upon
such grounds as exist at law or in equity for the revocation of any contract." 9 U. S. C. §2. In
considering whether respondent's agreement to arbitrate is unenforceable, we are mindful of the
FAA's purpose "to reverse the longstanding judicial hostility to arbitration agreements ... and to
place arbitration agreements upon the same footing as other contracts."
In light of that purpose, we have recognized that federal statutory claims can be appropriately
resolved through arbitration, and we have enforced agreements to arbitrate that involve such
9
claims. We have likewise rejected generalized attacks on arbitration that rest on "suspicion of
arbitration as a method of weakening the protections afforded in the substantive law to would-be
complainants." . These cases demonstrate that even claims arising under a statute designed to
further important social policies may be arbitrated because " `so long as the prospective litigant
effectively may vindicate [his or her] statutory cause of action in the arbitral forum,' " the statute
serves its functions.
In determining whether statutory claims may be arbitrated, we first ask whether the parties
agreed to submit their claims to arbitration, and then ask whether Congress has evinced an
intention to preclude a waiver of judicial remedies for the statutory rights at issue. In this case, it
is undisputed that the parties agreed to arbitrate all claims relating to their contract, including
claims involving statutory rights. Nor does Randolph contend that the TILA evinces an intention
to preclude a waiver of judicial remedies. She contends instead that the arbitration agreement's
silence with respect to costs and fees creates a "risk" that she will be required to bear prohibitive
arbitration costs if she pursues her claims in an arbitral forum, and thereby forces her to forgo
any claims she may have against petitioners. Therefore, she argues, she is unable to vindicate her
statutory rights in arbitration.
It may well be that the existence of large arbitration costs could preclude a litigant such as
Randolph from effectively vindicating her federal statutory rights in the arbitral forum. But the
record does not show that Randolph will bear such costs if she goes to arbitration. Indeed, it
contains hardly any information on the matter. As the Court of Appeals recognized, "we lack ...
information about how claimants fare under Green Tree's arbitration clause." The record reveals
only the arbitration agreement's silence on the subject, and that fact alone is plainly insufficient
to render it unenforceable. The "risk" that Randolph will be saddled with prohibitive costs is too
speculative to justify the invalidation of an arbitration agreement.
To invalidate the agreement on that basis would undermine the "liberal federal policy
favoring arbitration agreements." It would also conflict with our prior holdings that the party
resisting arbitration bears the burden of proving that the claims at issue are unsuitable for
arbitration. We have held that the party seeking to avoid arbitration bears the burden of
establishing that Congress intended to preclude arbitration of the statutory claims at issue.
Similarly, we believe that where, as here, a party seeks to invalidate an arbitration agreement on
the ground that arbitration would be prohibitively expensive, that party bears the burden of
showing the likelihood of incurring such costs. Randolph did not meet that burden. How detailed
the showing of prohibitive expense must be before the party seeking arbitration must come
forward with contrary evidence is a matter we need not discuss; for in this case neither during
discovery nor when the case was presented on the merits was there any timely showing at all on
the point. The Court of Appeals therefore erred in deciding that the arbitration agreement's
silence with respect to costs and fees rendered it unenforceable.
The judgment of the Court of Appeals is affirmed in part and reversed in part.
10
Link to full text of case: http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=us&vol=000&invol=97-2045
Sample Legal Case Brief: So. Central Bell v. Alabama (1999)
Parties: South Central Bell Telephone Company, who does business in Alabama but is not
incorporated there, filed suit against the State of Alabama.
Facts: Alabama requires each corporation doing business in the state to pay a franchise tax
based upon the firm’s capital. Alabama domestic corporations pay 1% of par value while foreign
corporations must pay .3% of actual capital. Since par value is a flexible concept, domestic
corporations can adjust their par value so that they pay a lower tax. However, foreign
corporations can’t adjust their tax basis. Thus, in practice, foreign corporations pay a higher tax
rate.
Lower Courts: The trial court agreed with Bell’s argument, but ruled against Bell based upon
the Alabama Supreme Court’s decision in Reynolds Metals, a similar case, which upheld the
different tax rates. The Alabama Supreme Court upheld the trial court dismissal of Bell’s case.
Legal Question: Does the Alabama foreign corporation franchise tax violate the Commerce
Clause of the Constitution?
Legal Answer: Yes. Bell wins.
Reasoning: Tax burdens on foreign corporations must be “roughly approximate” to those of
domestic corporations or similar in substance. Alabama’s tax doesn’t meet this standard.
Because Alabama law facially discriminates against foreign corporations, its law is a violation of
the Commerce Clause.
Significance: This case illustrates how the Constitution trumps state law and the reach of the
Commerce Clause. A State or local government may not favor local business and discriminate
against interstate business.
11